چکیده انگلیسی

Much of the current debate in ageing countries focuses on whether governments should increase investments in human capital. We address this issue by simulating the effects of additional education spending using an overlapping-generations model applied to Canada. In the context of population ageing, the results indicate that how the policy is funded has powerful impacts on the targeted outcomes. Higher education incentives may increase the rate of human capital accumulation and mitigate the negative effects of slowing labour force growth. However, the impact depends on the distortions implied by alternative tax instruments and the efficiency of public expenditures on education.

مقدمه انگلیسی

Canada and many developed economies are facing the challenges of population ageing and slowing labour force growth which are likely to adversely impact the standard of living in the long run. Current debates on education focus on the formation of human capital and knowledge accumulation as an alternative to mitigate the expected negative effects of those demographic challenges. According to the OECD (Education at a Glance, 2006), for the year 2004, 84% of Canadian adults aged 25–64 have attained at least upper secondary education. This proportion is greater than the OECD countries’ average (67%) but less than in the U.S. where this proportion is about 88%. When it comes to the percentage of population that has attained a tertiary education, Canada has the highest level among OECD countries, where 45% of adults aged 25–64 hold a tertiary degree. This high level is mainly due to a higher participation in vocational education (22%) with respect to OECD countries.
Canada's federal and provincial governments both play a key role in fostering education through transfer payments, research funding and student financial assistance. However, we note from Table 1 that Canada's share of GDP devoted to education has been decreasing and has been below that of the U.S. in 2001 and 2002. In addition, there has been a shift away from reliance on public funding of education in Canada. Since 1995, the contribution of the private sector has doubled, to reach 22% in 2002. The larger contribution from the private sector is partly explained by higher tuition fees. Between 1994 and 2005, the average tuition fee increased from $2535 to $3863 across Canada1. On the contrary, total expenditures on education, as a percentage of GDP, in the U.S. have remained fairly steady over time, and from 1995 to 2002 the contribution from the public sector has increased by 0.3 percentage points.Furthermore, although Canada has the highest post-secondary attainment rate among OECD countries, it has lower proportions of Masters’ and PhD graduates relative to its main trade partner, the U.S.2 Recent empirical studies suggest that countries not too far away from the technological frontier should invest primarily in higher education in order to enhance innovation, productivity and economic growth (Vandenbussche, Aghion, & Meghir, 2006)3.
On the other hand, Bowlus and Robinson (2005) estimate the relative contributions of PSE to human capital stocks in Canada and the U.S. for the period 1975–2000. Their results suggest that due to the larger fraction of university educated in the U.S., the post-secondary schooling may add substantially more efficiency units of human capital to those making the investment than it occurs in Canada. The authors claim that growing differences in the university sector may have played an important role in explaining the widening gap in living standards between the two countries since the 1990s.
In most countries, government plays an important role in human capital formation by providing funds for formal schooling and research. The existence of social benefits of education that are not captured by private agents supports the role for government education policy. Moreover, the empirical evidence supporting the hypothesis that investments in higher education and skills are more growth-enhancing strengthens the case for additional public expenditures on education. But the issue of expanding public investment in human capital and skills cannot be addressed separately from questions about how spending is funded because how taxes are raised has powerful impacts on the targeted outcomes. In the current study, we use a computable general equilibrium (CGE) model in order to assess the dynamic effects of tax-financed increases in public expenditures on PSE in the Canadian context of population ageing4. Particularly, we examine to what extent the benefits from higher education incentives could offset the distortionary effects of taxation.
The simulation results indicate that tax-financed increases in public spending on education may have significant crowding-out effects in the short run. In the long run, however, higher education incentives – through lower costs and improved education quality – may increase the rate of human capital accumulation which in turn could mitigate the negative impact of population ageing in terms of per capita income. Furthermore, economic and welfare effects analysis shows that the impact depends on the distortions implied by alternative tax instruments and the productivity of public expenditures on education.
The remainder of this paper proceeds as follows. Section 2 presents the characteristics of the model. The simulation scenarios and the results are discussed in Section 3. Section 4 concludes.

نتیجه گیری انگلیسی

Much of the current debate in ageing countries focuses on whether governments should increase investments in human capital to mitigate the negative effects of slowing labour force growth. In addition, recent empirical studies suggest that countries with advanced technologies, such as Canada, should invest primarily in higher education in order to enhance innovation, productivity and economic growth. This raises questions regarding the optimal level of government expenditures on higher education. But the issue of expanding public investment in human capital and skills cannot be addressed separately from questions about how spending is funded because how taxes are raised has powerful impacts on the targeted outcomes. To explore these issues the present study uses a computable overlapping-generations model to assess the dynamic effects of increasing government expenditure on PSE in the Canadian context of population ageing. Simulation results indicate that higher education incentives may increase the rate of human capital accumulation and mitigate the negative effects of slower labour force growth. However, the impact depends on the distortions implied by alternative tax instruments and the efficiency of public expenditures on education. Under both the lump-sum and personal income taxes scenarios, the rise in GDP does not necessarily translate into an increase in consumption13. However, under the more realistic scenario where the reform is funded through reductions in other public expenditures (Scenario 3) the economy achieves both higher GDP and positive changes in welfare. A change in the composition of public expenditures seems to be a more desirable alternative to raising income taxes to fund additional education spending.